A new report from the International Energy Agency (IEA) shows interest in new hydrogen projects continues to grow, however, the sector needs a great deal more policy and investment support.
According to the report, Global Hydrogen Review 2023, the installed capacity of low-emissions hydrogen remains low as developers wait for government support before making investments.
As such, low-emissions hydrogen still accounts for less than 1% of overall hydrogen production and use.
The report points to several challenges hindering sector progress, as well as the need for greater efforts to encourage uptake and build momentum in the wake of the global energy crisis.
The report highlights that new projects are facing supply chain disruptions, rising costs and high inflation, which are affecting the entire hydrogen value chain, driving up financing costs for developers and reducing the impact of government support.
These factors compound the already high upfront costs associated with equipment manufacturing, construction and installation.
Country commitments and government targets show a lack of attention to hydrogen demand creation, states the report, with government targets for creating demand accounting for just 14 million tonnes, only half of which is focused on existing hydrogen uses.
“We have seen incredible momentum behind low-emissions hydrogen projects in recent years, which could have an important role to play in energy-intensive sectors such as chemicals, refining and steel,” said IEA Executive Director Fatih Birol.
“But a challenging economic environment will now test the resolve of hydrogen developers and policymakers to follow through on planned projects. Greater progress is needed on technology, regulation and demand creation to ensure low-emissions hydrogen can realise its full potential.”
The way forward for hydrogen projects
The report outlines that low-emissions hydrogen can be an opportunity for countries to boost their economies for the future by creating new industrial supply chains.
However, to maximise these opportunities, lengthy time lags between policy announcements and implementation must be addressed to prevent project delays.
The IEA recommends effective delivery of support schemes, bolder action to stimulate demand, and addressing market barriers such as licensing and permitting. Moreover, establishing international markets in hydrogen requires cooperation to develop common standards, regulations and certifications.
